Facebook vs. Google: Who Will Win?
May 20, 2012 by admin
Filed under Facebook News
Facebook is now officially a public company, scads of new millionaires are on a Silicon Valley spending spree, and media outlets near and far have yet to pipe down about the IPO, likely one of the most anticipated in history.
But is the long-term viability and success of Facebook a slam dunk? You’d think so, considering 900 million people on the planet use the social network now valued at nearly $105 billion.
Not everybody thinks so.
The Telegraph’s Michael Deacon says he was once addicted to Facebook but now thinks its users hardly have anything to say on it compared with Twitter, which he calls “magnetic” because it “incessantly breaks and circulates news.” He even goes as far to say Facebook in a few years will “be as sad and lonely a ghost town as MySpace.”
I wouldn’t go quite that far, but he makes some valid points. Many people have grown tired of Facebook and do prefer alternate social networks, such as Google+.
Google certainly is serious about social and it’s no secret that Facebook wants more of Google’s advertising, but who will come out on top?
Social Networking Rivalry
Yes, Facebook has a huge head start in social compared to Google, but Google+ users tend to be fiercely loyal because, honestly, it’s a great — albeit very different — product .
Unlike Facebook, Google+ is where you’re more likely to engage with strangers — many of whom reach out from countries around the world.
Just this morning I had a Google+ chat with a blogger from India who, even though he uses both Facebook and Google+, was only able to reach me through the latter where in seconds we were having a conversation about the merits of both social networks. Such contact wouldn’t have happened on Facebook because my Facebook friends are all in the U.S. and most of them know me personally, which means I keep my chat disabled because I don’t want people I haven’t seen in 20 years messaging me every time I check my stream.
Eric Norstrom, a molecular and cellular neurobiologist, is another person with whom I’ve connected through Google+.
Here’s how he aptly puts it:
“G+ is not FB, Twitter, or anything else. It’s G+. It’s great for content aggregation and collaboration in addition to the services provided by the other major social apps. It’s not people bleating on a street corner. It’s more like, you walk down a street and don’t see anyone, but then you go into a building and you find that there’s a party going on. Not only that, it’s a good party with interesting people talking about things you care about and leaving out things you don’t. Less noise, more signal.”
He’s right about Google+ being a more lively place to hang out. You’re not likely to see inane posts — most contain photos, videos or links to other interesting content. This morning someone in one of my circles shared a post by Google Maps touting a NASA map that shows where the May 20 eclipse can be seen. (See also “Google+ vs. Facebook: See How They Compare.”
Google’s Many Products are an Advantage
While there certainly were some privacy concerns when Google said it would share user data across its products, it can’t be denied that the company has created a slick and seamless experience for users.
On my Android phone I use Places, Maps and Navigation, YouTube, Voice, Talk, Calendar, Drive, Goggles, and Play Music, and many of these apps sync to the cloud for integration to the desktop.
In essence, Google has a very large window into what I’m doing, where I’m going, what I’m watching, and who I’m talking to. And this window stays open for much of every day I’m online or using my phone.
While Facebook also garners data from me when I’m on its network, I’m not there very often, relatively speaking.
Battle Over Advertising
Facebook has many fans, is growing on a billion users, and now has a big pile of money with which to continue to innovate. For instance, the company recently said that at some point it could launch an advertising network to display ads outside of its platform. That would be huge and put the company in a much better place to compete with Google.
CNET’s Rafe Needlemanwrote a great piece summing up the many ways Facebook and Google’s trajectories cross, particularly when it comes to advertising. And as he points out, both companies have their strengths.
“The infusion of public IPO money will embolden Facebook to take on Google directly in areas where it’s clearly weaker — primarily advertising, but also search and mobile. Google will defend its turf while simultaneously attacking Facebook in social (and hopefully in identity services),” he writes.
That last part — identity services that let you sign into a Website or account using your Facebook credentials — is definitely something Facebook has a good hold on, and as Needleman points out, it’s something Google needs to get better at marketing.
But Google is kicking it with mobile. CEO Larry Page, in a letter to investors last month said the company is “seeing a hugely positive revenue impact from mobile advertising, which grew to a run rate of over $2.5 billion by the third quarter of 2011 — two and a half times more than at the same point in 2010.”
Can Facebook figure out how to get some of that pie? It had better — its users are now using the social network more from their mobile devices than from their desktops.
If it doesn’t, Michael Deacon’s dire prediction about Facebook might just come true.
Follow Christina on Twitter and Google+ for even more tech news and commentary and follow Today@PCWorld on Twitter, too.
Article source: http://www.pcworld.com/article/255866/facebook_vs_google_who_will_win.html
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Facebook CEO Mark Zuckerberg marries longtime girlfriend
May 20, 2012 by admin
Filed under Facebook News
Zuckerberg and 27-year-old Priscilla Chan tied the knot at a small ceremony at his Palo Alto, Calif., home, capping a busy week for the couple, according to a guest authorized to speak for the couple. The person spoke only on the condition of anonymity.
Zuckerberg took his company public in one of the most anticipated stock offerings in Wall Street history Friday. And Chan graduated from medical school at the University of California, San Francisco, on Monday, the same day Zuckerberg turned 28, the person said.
The couple met at Harvard and have been together for more than nine years, the person said.
Zuckerberg designed the ring featuring “a very simple ruby,” according to the person.
The ceremony took place in Zuckerberg’s backyard before fewer than 100 guests, including Facebook’s chief operating officer Sheryl Sandberg.
The guests all thought they were coming to celebrate Chan’s graduation but were told after they arrived that the event was in fact a wedding.
“Everybody was shocked,” the guest said.
Rather than his trademark hoodie, Zuckerberg wore a suit for the ceremony, while his bride wore a traditional wedding dress.
Food was served family-style and included dishes from the couple’s favorite Palo Alto sushi restaurant. The two had been planning the marriage for months but were waiting until Chan had graduated to hold the wedding, the guest said.
The timing wasn’t tied to the IPO, since the date the company planned to go public was a “moving target,” the guest said.
Even after the IPO, Zuckerberg remains Facebook’s single largest shareholder, with 503.6 million shares. And he controls the company with 56 percent of its voting stock.
The site, which was born in a dorm room eight years ago, has grown into a worldwide network of almost a billion people.
Zuckerberg founded Facebook at Harvard in 2004.
He was selected as Time’s Person of the Year in 2010, at age 26.
Zuckerberg grew up in Dobbs Ferry, N.Y.
Article source: http://www.usatoday.com/tech/news/story/2012-05-19/facebook-mark-zuckerberg-marries-girlfriend/55082954/1
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Facebook Gold Rush: Fanfare vs. Realities
May 19, 2012 by admin
Filed under Facebook News
This bit of Street wisdom came to mind last week, as Facebook went public amid so much fanfare.
The stock eked out a 23-cent gain on its Day 1, to $38.23. This suggests that many professional money managers viewed all the hype as just that. Whatever the long-term prospects of this company — an issue over which reasonable people reasonably disagree — the idea that small-time investors might get rich fast struck the pros as absurd.
It is true that initial public offerings have increasingly become a game for early investors and their Wall Street enablers. Since the 1980s, average first-day gains on new stock issues have risen steadily. According to one 2006 study, the average first-day return on I.P.O.’s in the 1980s was 7 percent. By the mid-1990s, it was 15 percent. In the 1999-2000 dot-com boom, it was 65 percent.
We all know how that last one turned out.
It’s no coincidence that as those averages were rising, individual investors were becoming more enamored with the stock market. The great democratization of the equity market, which began in the 1980s, lured small investors into the game.
A lot of these people got burned. Academics at the Warrington College of Business Administration at the University of Florida recently compiled a list of about 250 companies that doubled — at least — in price on their first trading day. Many quickly fell back to earth.
Going back to 1975, the list provides some of the greatest hits in I.P.O. land. The top 10 first-day gainers all went public in the Internet boom. They included VA Linux, which rose almost 700 percent, to a market capitalization of more than $1 billion, and The Globe.com, which produced a gain of 606 percent on its first day as a public company. Foundry Networks and WebMethods soared more than 500 percent.
Some of the companies on the list have disappeared or have been acquired. Others are still around, to lesser and greater degrees. TheGlobe.com trades at less than a penny a share. VA Linux is now called Geeknet and, as of Friday, had a market value of $94 million.
Why did Facebook get a relatively slow start out of the trading gate? One possibility is that the investment bankers who priced the stock considered the history of private trading in the shares before the offering. Facebook was unusual in this way, Laszlo Birinyi of Birinyi Associates pointed out last week.
“There was trading before the I.P.O., so many investors have some feel, some idea of pricing,” he noted. Most offerings are priced based upon what the company and its bankers guess the stock will fetch.
Indications are that Facebook was bought primarily by individual investors, not institutions. Indeed, institutions that had invested early were big sellers in the I.P.O. To many market veterans, this showed that the smart money was getting out while the getting was good.
With investors still believing the advice of Peter Lynch, the former Fidelity fund manager who told individuals to buy stocks of companies they knew as consumers, it is easy to see why Facebook’s offering resonated with the public. But now comes the hard part: operating as a company that returns its investors’ favors with actual earnings.
Article source: http://www.nytimes.com/2012/05/20/business/in-facebook-stock-rush-fanfare-vs-realities.html
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Sloppy Facebook IPO Predictions: Only 1.14% Get the Closing Price Right
May 19, 2012 by admin
Filed under Facebook News
What a tough Friday for casual investors: Facebook’s big IPO went live; the NASDAQ couldn’t keep up with the amount of orders pouring in; and a number of purchasers were left with shares on the table that they weren’t able to sell, absolutely nothing when they wanted to buy, or fulfilled orders that they were unable to cancel.
Regardless of the reasons why, Friday’s big activity on the stock market a record-setting amount of just around 580 million shares traded in a single day also showed just how off a number of stock-watchers and pundits were on their predictions for just how well Facebook’s IPO would perform. VentureBeat’s Jolie O’Dell has the list of Silicon Valley venture capitalists that screwed the proverbial pooch on this one, including Menlo Ventures’ Shervin Pishevar (with a closing price prediction of $63), First Round’s Josh Kopelman ($57), and Lowercase Capital’s Chris Sacca ($56).
Who got VentureBeat’s prediction game right? One venture capitalist: Menlo Ventures managing director, Mark Siegel, with a correct guess that Facebook’s $38 asking price seemed reasonable.
Wait, one person?
The “official” online record of Facebook IPO predictions, facebookipodayclosingprice.com, shows that it wasn’t just venture capitalists who expected a lot more than Facebook delivered. In total, only 26 people of the 2,261 submitting predictions to the site managed to guess Facebook’s final price correctly $38.23 a share, rounded down to $38 for the purposes of guessing. That’s a whopping 1.14 percent, for those keeping score at home.
Go figure: The number of Twitter followers a guesser has, a quick gauge of one’s online popularity, didn’t play into his or her ability to correctly predict the path of Facebook’s stock price. You have to scroll all the way down to #29 on the site’s popularity list, Electronic Frontier Foundation co-founder John Perry Barlow, before you see anything close to an estimate that resembles Facebook’s final price.
Barlow ended up guessing a closing price of $32 a share, which might have been achieved had Facebook’s lead underwriter, Morgan Stanley, not stepped in to prevent the share price from dropping below its $38 IPO price.
As for those left holding a piece of the Facebook pie, the real guessing game begins Monday: What happens to Facebook’s share price in a more normal trading environment?
For more tech tidbits from David Murphy, follow him on Facebook or Twitter (@thedavidmurphy).
For the top stories in tech, follow us on Twitter at @PCMag.
Article source: http://www.pcmag.com/article2/0,2817,2404646,00.asp
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A look at Facebook by the numbers
May 19, 2012 by admin
Filed under Facebook News
Facebook is the dominant social network in 11 of 12 key global markets surveyed by Nielsen.
Matthew Shaer /
May 19, 2012
Facebook done growing? Hardly.
Reuters
0 
With its much-ballyhooed IPO, Facebook remains the most popular social network in the world, outstripping all competitors in almost every key market. So say the folks at Nielsen, who yesterday released a new (and fascinating) batch of Facebook statistics. Among the findings: In the US, 69 percent of active Web users – or 152 million people – visit Facebook at least once a month.
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In Brazil, where once Orkut was king, a whopping 76 percent of Web users – or 38 million people – regularly use the social network. In Italy, the number is 70 percent. In New Zealand, it’s 79. The numbers, reps for Nielsen wrote, underscore “Facebook’s transcendence of borders around the world – and on the world wide web.” In fact, in the 12 markets surveyed by Nielsen, there’s only one place Facebook is not dominant: Japan.
RELATED: Facebook stock: 6 intriguing investors
According to Nielsen, in Japan “blog sites are more popular in the social media category,” and Facebook is fifth, not first, in the social media category. (Facebook is blocked in China for the foreseeable future.)
As we noted the other day, a new AP/CNBC poll reveals that 43 percent of Americans think Facebook will be successful over the long term, while a full 46 percent think Facebook will “fade away as new things come along.” It’s possible, of course, that Facebook will eventually get knocked off the leader-board. But considering the tight grip Facebook currently holds on the global market, that “fade” is probably not going to happen anytime soon.
Still, Facebook still must address one key challenge: Translating all those eyeballs, here and abroad, into advertising cash. Reps for the social network have been touting the precise and wide-reaching power of Facebook as an advertising platform – it’s a key part of the pre-IPO pitch to investors. Yesterday, however, came the news that General Motors was pulling its advertisements from Facebook.
The reason? Facebook wasn’t helping GM sell cars. More on that development here. And for more tech news, follow us on Twitter @venturenaut.
RELATED: Facebook stock: 6 intriguing investors
Article source: http://www.csmonitor.com/Innovation/Horizons/2012/0519/A-look-at-Facebook-by-the-numbers
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Expert: Facebook targeting all 7B people on Earth
May 19, 2012 by admin
Filed under Facebook News
(CBS News) NEW YORK — After all the hype, Facebook’s stock fell flat on its first day of trading.
Shares in the social networking giant opened at 38 dollars, shot up briefly, then fell – and finished just 23 cents higher.
But it’s still the most valuable U.S. company to ever go public, and many of its employees became instant millionaires.
And some analysts say what happened Friday should not be viewed as a failure, notes CBS News correspondent Elaine Quijano. They say another way to look at it is that the offering price set by Facebook and investment bankers was just right.
Facebook now has a market value of some $105 billion. That’s more than Amazon and McDonald’s.
Complete coverage: Facebook goes public
For Facebook, it was a “huge win,” tech journalist David Kirkpatrick told “CBS This Morning: Saturday” co-hosts Jeff Glor and Rebecca Jarvis. “They achieved what they wanted to achieve, which was raise an awful lot of money to give liquidity to the early investors and the employees.”
Kirkpatrick said that, right after Facebook co-founder and CEO Mark Zuckerberg rang Friday’s opening bell for NASDAQ he told his employees, “Let’s get back to work. I can’t wait to see what you’re gonna invent next.”
“That’s the mindset,” Kirkpatrick said. “At the company, a lot of people were posting on their Facebook page, on their status update, they were just putting the figure 1 percent. That’s all they put. What they meant by that was, ‘We are only one percent of the way there.’ It’s sort of a way of saying, ‘We’re just getting started, keep your eye on us.”‘
CBS News correspondent Elaine Quijano followed the status of Friday’s trading in Facebook stock and filed a report you can see in this video:
Kirkpatrick, who’s the author of “The Facebook Effect,” a look at the impact of the social network on our world, says the company looks at things as there are “7 billion people on the planet. … Mark really believes he can get to the majority of the planet.
“In fact, if you look at the growth they’ve been experiencing in the last couple of years, it’s been in Indonesia, Brazil, South Africa, Nigeria — these are the places they are targeting.
“The reality is that those markets generally are not very lucrative, there’s not a big Internet advertising market in those countries. But the point is, they have a really long-term view.
“And that’s where the (disconnect)occurs, because Wall Street has a really short-term view. It’s an odd thing for a company with such a big picture, social mission as Facebook to kind of butt up against the very short-term money-oriented mindset of Wall Street.
To see the entire interview, click on the video in the player above.
Article source: http://www.cbsnews.com/8301-505263_162-57437660/expert-facebook-targeting-all-7b-people-on-earth/
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As Facebook millionaires party, what future for new shareholders?
May 19, 2012 by admin
Filed under Facebook News
An expected ‘pop’ in share prices never came as Facebook went public this week. But Facebook’s IPO was a measured affair, lacking in irrational exuberance, and laying the groundwork for the network’s main challenge: Turning ‘friends’ into consumers.
Patrik Jonsson, Staff writer /
May 19, 2012
Facebook founder, Chairman and CEO Mark Zuckerberg, center, applauds at the opening bell of the Nasdaq stock market, Friday, May 18, 2012, from Facebook headquarters in Menlo Park, Calif.
Zef Nikolla/Nasdaq via Facebook/AP
0 
ATLANTA
Speculators hoping for a big “buy, sell” cash out from the Facebook IPO were mostly disappointed Friday as Wall Street agreed that the $38 per share asking price set by the social network’s founder, Mark Zuckerberg, was just about right for the launch of the 8-year-old company’s publicly-owned entity.
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The historic IPO – the second largest ever, behind VISA – made billionaires and millionaires out of hundreds of Facebookers as the company raised $16 billion by selling 421 million shares, setting the stage for the evolution of a firm that started as a digital college kid hangout to become a profitable purveyor of personal status updates and “likes” connecting about 15 percent of the world’s population
But as its value rose to rival corporate behemoths like McDonald’s and Amazon, the Facebook IPO also represented an uneasy ascendancy of a company that many people say teeters on being a fad, run by a 28-year-old wunderkind who prefers hoodies and sneakers over suits and ties.
RECOMMENDED: Facebook IPO: Five things to know before buying the stock
Although several underwriting banks had to buy shares in order to keep the price from dipping below its offering price, some analysts saw the measured debut as a good sign, setting the company up for a decent shot at building a profitable ad model to boost the company’s earnings and value.
“Zuckerberg priced the shares correct,” writes columnist Nathan Vardi, at Forbes. “This was not a modest debut; it was a home run.”
The stock price rose slightly on Friday as prospectors prodded before falling back to around $38.
The IPO created instant wealth for hundreds of private share holders, mostly around California’s Menlo Park. Zuckerberg himself is now worth $19 billion, about five times the company’s annual revenues, and U2 singer Bono, an early investor, saw his worth rise by $1.5 billion, making him the wealthiest musician in the world, richer than Paul McCartney.
But the IPO also came amid growing questions, including from General Motors, about whether Facebook’s ad model actually works. GM decided to pull a $10 million ad buy. And with revenue growth slowing, Facebook has also struggled in the mobile space, which will become, according to Zuckerberg, its prime goal this year.
The company has also struggled with privacy concerns, since it uses personal information to target ads. While some polls have suggested that Americans may be tiring of the “social utility,” it has, some experts note, become almost too ubiquitous to fail.
With public investors eyeing the company’s every move, the push to monetize content on the site is likely to be stepped up as Facebook now has to prove it can make money, all of which will continue to test the creativity of the young – and now very rich – Facebook brain trust.
“There is more pressure to make money and I think users see that,” says Roger Cheng, the executive editor of the tech site CNET, in a recent CNBC interview. “That said, people are stuck with Facebook, all their friends are on it. So … even if people are turned off by the ads, it is tough to see people leaving the Facebook service.”
That fact alone won’t likely be enough to allay worries among Facebook’s new share owners and the bankers who bought shares to prop up the price.
As the IPO party continues on the West Coast – where Porsches are flying off dealers’ lots into the garages of newly-minted overnight millionaires – “anxiety increases on the East [Coast] – at least for the bankers fearful of Monday morning,” writes tech columnist Paul Sloan.
So far, most Wall Street analysts are holding back assessments until Monday’s opening bell. Some, however, are already saying “sell.”
“While we like the company, we’re troubled by investors’ perception of the risks,” said Brian Wieser, an analyst for Pivotal Research Group, in a meeting with reporters. “It’s priced for perfection and that’s clearly implausible.”
RECOMMENDED: Facebook IPO: Five things to know before buying the stock
Article source: http://www.csmonitor.com/USA/2012/0519/As-Facebook-millionaires-party-what-future-for-new-shareholders
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Facebook’s $16bn IPO means nothing today
May 19, 2012 by admin
Filed under Facebook News
The biggest tech event of the year – if you believe the financial pundits – has been and gone, leaving analysts, shareholders and Mark Zuckerberg to pick through the remains of the Facebook IPO. Seldom have so many gathered to stretch credibility and understanding to talk about so little. In the end, despite stock flat-lining in a way that sent delicious shivers of schadenfreude down the spines of those who still can’t quite see the worth in shared contemplation of navels, Facebook has more than $16bn of extra cash in its account. For actual Facebook users though – in fact, for just about everyone, even if they’re now a shareholder in the company – the IPO is, so far, gloriously irrelevant.
[Image: Associated Press] Nobody could quite predict what would happen in the IPO, and that’s probably what made it so popular a topic. Everybody would love to be an expert – especially in the aftermath of not only the original dotcom bubble, but the more recent economic downturn – and speculating online, in newspapers and on TV and radio about how shares in Zuckerberg’s empire could make not only him and his team rich, but the rest of us too, held an inescapable allure. That Facebook is, by now, a household name made it all the more wonderful. Sure, if Samsung, or Microsoft, or even Google had their IPO over, there’d be plenty of tech and finance press hyperbole, but Facebook has managed to embed itself into non-techie culture. Your mom knows what Facebook is, though she might not quite understand what Microsoft does or why the new Samsung smartphone is whipping up geek frenzy. One of the more prevalent questions has been why that excitement Facebook mustered came about in the first place: why, in short, anybody cares. Overlook the addictive frottage of punditry at your peril, however. In that way, the social site is no different from, say, Samsung’s Galaxy S III, or the Apple television: speculating, rumormonging and generally arguing about what-might-be is perhaps more interesting than the actual news itself. In fact, once that news coalesces into something legitimate – shares are sold, products launched – the core cadre of opinionists often move on to the Next Big Thing. “Facebook already had a bulging wallet; now it has more” Facebook already had a bulging wallet of money; now it has even more. In itself, that’s not especially interesting. The tech world will really wake up when Zuckerberg Co. reveals what it will do with all these new billions. Much has been made of the comparative valuations of Facebook and Apple, with social network skeptics pointing out that Zuckerberg’s site is just a place to share anecdotes and photos of your breakfast, while Apple actually makes products that people buy. It’s a closed-minded view of value, however. Facebook may not have a physical device that you can walk to a brick-and-mortar store and exchange case for – at least, not yet; the Facebook Phone rumors simply refuse to die away completely – but it does have a service that has embedded itself into the lives of millions upon millions of people. That degree of engagement isn’t going to go away easily. True, it will be perhaps more difficult for Facebook’s board to leverage those users into cold, hard cash – recent stats on just how few people consider ever clicking on a Facebook advert or promotional post have likely given those in charge a few sleepless nights, if the IPO itself wasn’t proving sufficiently insomnia provoking – but it’s certainly not impossible. TV channels where ticker-tapes dominate the screen will soon move on to fresher financial pastures. For actual users of Facebook, however, nothing is different today, in the post-IPO glow, than it was on Thursday. Their excitement – and, a further orbit out, the rest of the world who will watch as Zuckerberg acquires, challenges or destroys companies, products and services we currently use or own – is still to come. Sixteen billion is a nice, hypnotic number, certainly, but it only really shows its true worth when it’s spent on something.
Article source: http://www.slashgear.com/facebooks-16bn-ipo-means-nothing-today-19229014/
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Facebook’s next task: proving itself
May 19, 2012 by admin
Filed under Facebook News
Facebook now has some proving to do.
On its first day of trading as a public company, Facebook did not deliver the pop that many investors have come to expect from Internet companies. The lackluster performance may be an early sign the market is not fully comfortable valuing Facebook at $105 billion, a number that assumes the company is capable of producing enormous profits.
After technical glitches delayed the start of Facebook’s trading by one-half hour, one of the most anticipated initial public offerings in Wall Street history ended with the company’s stock at $38.23, up 23 cents from Thursday night’s pricing.
“Going public is an important milestone in our history,” 28-year-old CEO Mark Zuckerberg said before pushing a button that rang Nasdaq’s opening bell from company headquarters in Menlo Park, Calif. “But here’s the thing: Our mission isn’t to be a public company. Our mission is to make the world more open and connected.”
Still, the increase of six-tenths of 1 percent was a letdown for many seeking a big, first-day pop in Facebook’s share price.
“This is like kissing your sister,” said John Fitzgibbon, founder of IPO Scoop, a research firm. “With all the drumbeats and hype, I don’t think there’ll be barroom bragging tonight.”
The small jump in price, however, could be seen as an indication Facebook and investment banks priced the stock in an appropriate range.
It also was good for ordinary investors who mostly are shut out from the IPO price. They had a chance to buy all day at a price not much above $38.
And it was good for early investors in the company, who owned more than half the 421 million shares made available in the IPO. Had the stock shot to $60, those early investors would have felt they hadn’t gotten enough money for their stakes.
Many of those investors who chose to friend Facebook on Friday expect it to be their best friend for a long time. Yet stock-market history shows this ardor evaporates when a highly valued company disappoints.
“At $100 billion, everything has to go according to plan,” said Aswath Damodaran, a professor of finance at New York University. He said he thinks the company could be worth about one-third less.
In isolation, $105 billion does not mean much. That value therefore has to be compared with Facebook’s earnings and sales. And that is when it begins to look like the company is priced for perfection.
Facebook traded Friday at 108 times its earnings in the 12 months through March, compared with 14 times for the overall market and 18 times for Google, Facebook’s main competitor for online advertising. On sales, Facebook’s stock price also looks rich, even alongside similar companies. LinkedIn, the social network, trades at 17 times sales. Facebook far exceeds that at 26 times.
“I can’t justify it,” said Anup Srivastava, an assistant professor at the Kellogg School of Management. “Facebook is a great business, but it’s worth around $25 billion.”
There is one measure upon which Facebook does not look the most expensive — how much value the market places on each of its users. The company had 806 million worldwide visitors in March, according to comScore, a data firm. The market values each of those at $130, compared with $172 at Google. But there is a good reason Google is higher. It makes $35 in revenue for each user, seven times more than Facebook.
Young companies often start out trading with absurd-looking valuations, but then fulfill them as they produce earnings that investors expect. Google went public in 2004 at a similar valuation. Its shares since have gone up seven times.
But Facebook’s business model is not as clear as Google’s, Damodaran says. He says it would be a mistake to assume that, just because Facebook has millions of users, it can make strongly increasing profits for the foreseeable future.
“It’s like a Chinese company that says it’s worth a lot because there are a billion people in China,” Damodaran said.
The next big market milestone for Facebook will occur in early summer. That event will be Facebook’s first quarterly earnings report as a public company. Shares of other Internet companies with recent IPOs have fallen after releasing earnings that did not meet expectations.
Investors will be scouring the numbers for evidence Facebook is finding new ways of generating advertising revenue, which accounts for 85 percent of total sales.
Investors may treat Facebook like Amazon and award it a stratospheric valuation even in the absence of strong profit growth. Amazon has this favored status mainly because investors say they believe its huge and hard-to-assail presence in online shopping give it the time to generate bigger earnings. Likewise, no social networks look like becoming close rivals to Facebook.
But the danger for Facebook is that, if its shares start falling soon, more skepticism may arise. Facebook may find it difficult to win back the faith among investors.
“Facebook has a great product, but it’s not a great company yet,” Damodaran said.
Article source: http://seattletimes.nwsource.com/html/businesstechnology/2018240486_facebook19.html
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Facebook’s next task: proving itself
May 19, 2012 by admin
Filed under Facebook News
Facebook now has some proving to do.
On its first day of trading as a public company, Facebook did not deliver the pop that many investors have come to expect from Internet companies. The lackluster performance may be an early sign the market is not fully comfortable valuing Facebook at $105 billion, a number that assumes the company is capable of producing enormous profits.
After technical glitches delayed the start of Facebook’s trading by one-half hour, one of the most anticipated initial public offerings in Wall Street history ended with the company’s stock at $38.23, up 23 cents from Thursday night’s pricing.
“Going public is an important milestone in our history,” 28-year-old CEO Mark Zuckerberg said before pushing a button that rang Nasdaq’s opening bell from company headquarters in Menlo Park, Calif. “But here’s the thing: Our mission isn’t to be a public company. Our mission is to make the world more open and connected.”
Still, the increase of six-tenths of 1 percent was a letdown for many seeking a big, first-day pop in Facebook’s share price.
“This is like kissing your sister,” said John Fitzgibbon, founder of IPO Scoop, a research firm. “With all the drumbeats and hype, I don’t think there’ll be barroom bragging tonight.”
The small jump in price, however, could be seen as an indication Facebook and investment banks priced the stock in an appropriate range.
It also was good for ordinary investors who mostly are shut out from the IPO price. They had a chance to buy all day at a price not much above $38.
And it was good for early investors in the company, who owned more than half the 421 million shares made available in the IPO. Had the stock shot to $60, those early investors would have felt they hadn’t gotten enough money for their stakes.
Many of those investors who chose to friend Facebook on Friday expect it to be their best friend for a long time. Yet stock-market history shows this ardor evaporates when a highly valued company disappoints.
“At $100 billion, everything has to go according to plan,” said Aswath Damodaran, a professor of finance at New York University. He said he thinks the company could be worth about one-third less.
In isolation, $105 billion does not mean much. That value therefore has to be compared with Facebook’s earnings and sales. And that is when it begins to look like the company is priced for perfection.
Facebook traded Friday at 108 times its earnings in the 12 months through March, compared with 14 times for the overall market and 18 times for Google, Facebook’s main competitor for online advertising. On sales, Facebook’s stock price also looks rich, even alongside similar companies. LinkedIn, the social network, trades at 17 times sales. Facebook far exceeds that at 26 times.
“I can’t justify it,” said Anup Srivastava, an assistant professor at the Kellogg School of Management. “Facebook is a great business, but it’s worth around $25 billion.”
There is one measure upon which Facebook does not look the most expensive — how much value the market places on each of its users. The company had 806 million worldwide visitors in March, according to comScore, a data firm. The market values each of those at $130, compared with $172 at Google. But there is a good reason Google is higher. It makes $35 in revenue for each user, seven times more than Facebook.
Young companies often start out trading with absurd-looking valuations, but then fulfill them as they produce earnings that investors expect. Google went public in 2004 at a similar valuation. Its shares since have gone up seven times.
But Facebook’s business model is not as clear as Google’s, Damodaran says. He says it would be a mistake to assume that, just because Facebook has millions of users, it can make strongly increasing profits for the foreseeable future.
“It’s like a Chinese company that says it’s worth a lot because there are a billion people in China,” Damodaran said.
The next big market milestone for Facebook will occur in early summer. That event will be Facebook’s first quarterly earnings report as a public company. Shares of other Internet companies with recent IPOs have fallen after releasing earnings that did not meet expectations.
Investors will be scouring the numbers for evidence Facebook is finding new ways of generating advertising revenue, which accounts for 85 percent of total sales.
Investors may treat Facebook like Amazon and award it a stratospheric valuation even in the absence of strong profit growth. Amazon has this favored status mainly because investors say they believe its huge and hard-to-assail presence in online shopping give it the time to generate bigger earnings. Likewise, no social networks look like becoming close rivals to Facebook.
But the danger for Facebook is that, if its shares start falling soon, more skepticism may arise. Facebook may find it difficult to win back the faith among investors.
“Facebook has a great product, but it’s not a great company yet,” Damodaran said.
Article source: http://seattletimes.nwsource.com/html/businesstechnology/2018240486_facebook19.html
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